Fonterra Shareholders’ Fund Annual Results 2020

Page 1


Results for announcement to the market
Name of issuer Fonterra Shareholders’ Fund
Reporting Period 12 months to 31 July 2020
Previous Reporting Period 12 months to 31 July 2019
Currency New Zealand Dollars
Amount (m’s) Percentage change
Revenue from continuing
operations
$6 N/A
Total Revenue $6 N/A
Net profit/(loss) from
continuing operations
$nil -%
Total net profit/(loss) $nil -%
Interim/Final Dividend
Amount per Quoted Equity
Security
Final dividend (distribution) of 5 cents per unit
Imputed amount per Quoted
Equity Security
Not Applicable
Record Date 25 September 2020
Dividend Payment Date 15 October 2020
Current period Prior comparable period
Net tangible assets per
Quoted Equity Security
$3.82 $3.77
A brief explanation of any of
the figures above necessary
to enable the figures to be
understood
Fonterra Shareholders’ Fund financial statements are prepared in accordance
with New Zealand Equivalents to International Financial Reporting Standards.
Revenue from continuing operations comprises net fair value movements of
Economic Rights of Fonterra Shares, and dividend income (if any) received
during the period year.
Revenue from continuing operations has moved from a loss in the prior year of
$(144,000,000) to a gain for the current reporting period. Therefore, the
percentage change is not considered meaningful.
Authority for this announcement
Name of person authorised
to make this announcement
Andrew Cordner

Contact person for this
announcement
Simon Till

Contact phone number
+64 21 777 807

Contact email address Investor.relations@fonterra.com

Date of release through MAP 18/09/2020

Audited financial statements accompany this announcement.

---

Fonterra
Shareholders’
Fund
ANNUAL
REPORT
2020

ContentsChairman’s
Report
Fonterra Shareholders’ Fund
Dear Investors,
Fonterra’s performance has improved this year, and as a result so has the
position of the Fonterra Shareholders’ Fund. 2020 has been a challenging
year for businesses around the world as markets contended with the
impact of Covid-19. It was no different for Fonterra, with Covid-19 bringing
increased volatility and uncertainty to the global dairy market, but despite
this, Fonterra has achieved the priorities it set itself for the year.
Normalised earnings per share came in at the top of the range at 24 cents
per share, and with these improved earnings and a stronger balance sheet,
Fonterra has recommenced paying a dividend, which was one of the
Fonterra Board’s priorities for the 2020 financial year.
Fonterra declared a final dividend of 5 cents per share. As a result, unit
holders will receive a final distribution of 5 cents per unit. The record date
for the final distribution is 25 September 2020 and the payment date is 15
October 2020.
The Fund, and the Board of FSF Management Company Limited that
oversees it, have no direct involvement in Fonterra’s operations. However,
as a holder of Economic Rights in Fonterra Co-operative Group Limited
(Fonterra) the performance of the Fund is tied directly to Fonterra’s
performance. The Board of FSF Management liaises regularly with Fonterra
in raising issues relevant to the interests of the Fund.
BUSINESS PERFORMANCE FOR THE 2020 FINANCIAL YEAR
Fonterra’s reported Profit After Tax was $659 million, up $1.3 billion on
last year. Debt was reduced significantly, down $1.1 billion.
The underlying business performance improved. Fonterra’s foodservice
business had a significantly better first half of the year, in particular in
Greater China, but this was partially offset by the disruption of Covid-19
during the second half. Conversely, Fonterra Ingredients’ earnings were
down for the first six months relative to the prior year. However, the second
half of the year the Ingredients business benefited from favourable product
price movements and its offshore Ingredients business benefited from
continued implementation of cost efficiencies.
Fonterra’s consumer business performance was down compared to the
prior year. This was mainly due to business disruptions in Hong Kong and
Chile plus impairments to the value of its Chesdale brand and goodwill in
the New Zealand Consumer business.
It is positive to see Fonterra has continued to focus on financial discipline.
In the financial year this resulted in improved cash flows and improved
gearing and debt payback ratios. Fonterra’s free cash flow, being the
cash flow that is available to pay interest and dividends and to reduce
debt, increased by $733 million to $1.8 billion. Fonterra achieved this
significant increase through a combination of improved earnings, lower
capital expenditure, the sale proceeds from divesting DFE Pharma and
foodspring
®
and reducing its Beingmate shareholding.
PRIORITIES FOR 2021
Looking to the 2021 financial year, there is a high level of uncertainty
as to how the global recession and new waves of Covid-19 may impact
dairy demand globally. It is something Fonterra’s management team
will be monitoring closely throughout the financial year.
Fonterra’s CEO, Miles Hurrell, believes the best way of coping with
uncertainty is to stay on strategy and focus on what is within its control.
He addresses these priorities in Fonterra’s annual report.
The Board of FSF Management Company Limited is pleased with
the improved performance from Fonterra this year and hopes to see
it build on this positive result during the coming financial year.
John Shewan
CHAIRMAN'S REPORT 1
OUR BOARD 2
FINANCIAL STATEMENTS 4
S TATUTORY INFOR M ATION16
DIRECTORY24
1
Annual Report 2020

Our Board
ANDREW MACFARLANE
B . Agr. Sc
Appointed to the Board of the Manager by Fonterra
Andy Macfarlane was elected to the Fonterra Board in 2017. Andy was a
farm management consultant for 38 years. He is a Councillor of Lincoln
University and a Director of ANZCO. Andy is an active member of the
International Farm Management Association (IFMA), Global Dairy Farmers
and New Zealand Institute of Primary Industry Management (NZIPIM).
Andy was previously a Director of Ngai Tahu Farming Limited. He is the
Past President of the NZIPIM and chaired Deer Industry New Zealand for
seven years.
Andy began farming in 1989 and lives near Ashburton. He has shareholding
interests in the South Island. Andy has a strong understanding of the
governance of research and development and innovation, and has a
particular interest in the strategic use of technology in the dairy industry.
PIP DUNPHY
B.Horti.Sci, CFA
Independent Director appointed by unit holders
Pip Dunphy has worked as a non-executive director for the last 14 years
in a variety of different industries and companies.
Pip currently chairs the Boards of Transpower New Zealand Limited and
Abano Healthcare Group Limited. She was previously the Chair of
First Gas Limited and its associated companies.
DONNA SMIT
FCA
Appointed to the Board of the Manager by Fonterra
Donna Smit was elected to the Fonterra Board in December 2016. Donna
lives and farms at Edgecumbe, and has built and owns five dairy farms in
Eastern Bay of Plenty and Oamaru. Donna is a Director of EastPack Limited
and Kiwifruit Equities Limited and a Trustee of the Dairy Women’s Network.
Donna is a Fellow Chartered Accountant and was a company administrator
at kiwifruit co-operative EastPack for 24 years. Donna’s strong focus on
financial and risk management has been built through her extensive
business and manufacturing experience and financial background, and
complements her deep dairy farming experience.
JOHN SHEWAN
CNZM BCA (Hons), FCA
Independent Director appointed by unit holders
John Shewan was appointed Chairman of the FSF Board in November 2012.
John currently chairs the Boards of Munich Reinsurance Australasia and
Wellington Regional Stadium Trust. He is a Director of China Construction
Bank (New Zealand) Limited.
John is an Adjunct Professor in the Business School at Victoria University.
KIM ELLIS
BCA (Hons), BE (Hons)
Independent Director appointed by unit holders
Kim Ellis was the Chief Executive Officer of listed company Waste
Management NZ for 13 years, until its sale in 2006.
Kim currently chairs the Boards of Green Cross Health, New Zealand Social
Infrastructure Fund and Metlifecare Limited.
Kim also holds directorships in Freightways, Ballance Agri-Nutrients and
the Port of Tauranga.
32
Fonterra Shareholders’ FundAnnual Report 2020

MANAGER’S STATEMENT5
STATEMENT OF COMPREHENSIVE INCOME6
STATEMENT OF CHANGES IN AMOUNTS
ATTRIBUTABLE TO UNIT HOLDERS6
STATEMENT OF FINANCIAL POSITION7
CASH FLOW STATEMENT7
SIGNIFICANT ACCOUNTING POLICIES8
NOTES TO THE FINANCIAL STATEMENTS10
INDEPENDENT AUDITOR’S REPORT14
S TATUTORY INFOR M ATION16
DIRECTORY24
Financial
Statements
FOR THE YEAR ENDED 31 JULY 2020
Manager’s Statement
FOR THE YEAR ENDED 31 JULY 2020
MANAGER’S STATEMENT
FSF Management Company Limited (the Manager) presents to the
unit holders the financial statements for the Fonterra Shareholders’
Fund (the Fund) for the year ended 31 July 2020.
The Manager is responsible for presenting financial statements for each
financial year which fairly present the financial position of the Fund and
its financial performance and cash flows for that period.
The Manager considers the financial statements of the Fund have been
prepared using accounting policies which have been consistently applied
and supported by reasonable judgements and estimates, and that all
relevant financial reporting and accounting standards have been followed.
John Shewan Kimmitt Ellis
Chairman Director
FSF Management Company Limited FSF Management Company Limited
17 September 2020 17 September 2020
The Manager believes that proper accounting records have been kept
which enable, with reasonable accuracy, the determination of the financial
position of the Fund and facilitate compliance of the financial statements
with the Financial Markets Conduct Act 2013 and the
Fonterra Shareholders’ Fund Trust Deed.
The Manager considers that it has taken adequate steps to safeguard the
assets of the Fund, and to prevent and detect fraud and other irregularities.
The Manager approves and authorises for issue the financial statements
for the year ended 31 July 2020 presented on pages 6 to 13.
For and on behalf of the Board of the Manager:
54
Fonterra Shareholders’ FundAnnual Report 2020

Statement of Financial Position
AS AT 31 JULY 2020
Cash Flow Statement
FOR THE YEAR ENDED 31 JULY 2020
The accompanying significant accounting policies and notes form part of these financial statements.
$ MILLION
NOTES31 JULY 202031 JULY 2019
Assets
Economic Rights of Fonterra shares2400388
Total assets400388
Liabilities
Amounts attributable to unit holders3400388
Total liabilities400388
$ MILLION
NOTES31 JULY 202031 JULY 2019
Cash flows from operating activities
Cash was provided from:
– Sale of Economic Rights of Fonterra shares59120
Cash was applied to:
– Purchase of Economic Rights of Fonterra shares(65)(82)
Net cash flows from operating activities4(6)38
Cash flows from financing activities
Cash was provided from:
– Proceeds from issue of units6582
Cash was applied to:
– Outflows on redemption of units(59)(120)
Net cash flows from financing activities6(38)
Net (decrease)/increase in cash and cash equivalents––
Cash and cash equivalents at the beginning of the year––
Cash and cash equivalents at the end of the year––
Statement of Comprehensive Income
FOR THE YEAR ENDED 31 JULY 2020
Statement of Changes in Amounts
Attributable to Unit Holders
FOR THE YEAR ENDED 31 JULY 2020
$ MILLION
31 JULY 202031 JULY 2019
Net fair value gain/(loss) on revaluation of Economic Rights of Fonterra shares6(144)
Investment income/(expense)6(144)
Net change in fair value of amounts attributable to unit holders(6)144
Finance (cost)/income(6)144
Profit before tax––
Tax exp ense––
Profit for the year––
There are no items of other comprehensive income.
$ MILLION
Amounts attributable to unit holders at 1 August 2019388
Movements:
Revaluation of amounts attributable to unit holders6
Issue of units65
Redemption of units(59)
Amounts attributable to unit holders at 31 July 2020400
Amounts attributable to unit holders at 1 August 2018570
Movements:
Revaluation of amounts attributable to unit holders(144)
Issue of units82
Redemption of units(120)
Amounts attributable to unit holders at 31 July 2019388
The accompanying significant accounting policies and notes form part of these financial statements.
76
Fonterra Shareholders’ FundAnnual Report 2020

C) OPERATING SEGMENTS
The Fund’s investments only include Economic Rights assets and the Fund’s
performance is evaluated on an overall basis. Therefore, the Fund is a single
segment entity.
All of the Fund’s income is from investments in the Economic Rights.
The internal reporting provided to the Board of the Manager, which is the
Fund’s chief operating decision maker, for the Fund’s assets, liabilities and
performance is prepared on a consistent basis with the measurement and
recognition principles of NZ IFRS. The Board of the Manager reviews the
Fund’s internal reporting in order to assess the performance and position of
the Fund.
D) DIVIDEND INCOME
Dividend income from investments in Economic Rights is recognised in
profit or loss on the date that the right to receive payment of the dividend
is established, when it is probable that the economic benefits will flow to
the Fund and the amount of the dividend can be reliably measured.
E) DISTRIBUTIONS TO UNIT HOLDERS
Distributions payable to unit holders are recognised in profit or loss as
finance costs in the period in which they are declared by the Board of
the Manager.
F) FINANCIAL ASSETS AND FINANCIAL LIABILITIES
A financial asset or liability is recognised when the Fund becomes a party
to the contractual provisions of the asset or liability (i.e. trade date).
Financial assets are derecognised if the Fund’s contractual rights to the
cash flows from the financial assets expire or if the Fund transfers the
financial asset to another party without retaining control or substantially all
risks and rewards of the asset. Financial liabilities are derecognised if the
Fund’s obligations specified in the contract expire or are discharged
or cancelled.
Economic Rights of Fonterra shares
The Economic Rights of Fonterra shares are measured at fair value.
Changes in fair value are recognised as investment income in profit or loss.
The Economic Rights are a current asset.
Amounts attributable to unit holders
The Fund has an obligation to repurchase units from Farmers, the
Registered Volume Provider and Fonterra, therefore the amounts
attributable to unit holders is a financial liability. It is presented as a
financial liability because it does not meet the limited set of criteria that
would allow it to be presented as equity. The amounts attributable to unit
holders is a current liability.
The Fund manages its amounts attributable to unit holders on a fair value
basis. Therefore, the Fund has elected to measure the amounts attributable
to unit holders at fair value. Changes in fair value are recognised as finance
costs in profit or loss.
G) TA X
The Fund has elected to be a ‘foreign investment variable-rate Portfolio
Investment Entity’ for New Zealand income tax purposes. Due to this
election, income is effectively taxed in the hands of the unit holders and
therefore the Fund has no tax expense, current tax payable or deferred tax
assets or liabilities.
The Fund will attribute PIE income (being Fonterra dividends) to unit
holders and pay tax on that income at each relevant unit holder’s
nominated prescribed investor rate (PIR), being their applicable tax rate,
subject to the option to apply the non-resident withholding tax rules in
respect of Notified Foreign Investors. When the Fund receives Fonterra
dividends the Fund will retain an amount from dividends distributed to a
unit holder to satisfy the PIE (or withholding) tax liability in relation to that
unit holder and pay amounts owing direct to the IRD. It is not anticipated
that the Fund will have a PIE tax loss or excess tax credits which will be
attributed to unit holders.
H) NEW STANDARDS AND INTERPRETATIONS
Standards effective from 1 August 2019
The Fund adopted NZ IFRS 16 Leases from 1 August 2019. As the Fund has
not entered into any lease arrangements, the adoption of this accounting
standard had no impact on the Fund.
Standards issued but not yet effective
A number of amendments to standards and interpretations have been
issued which were available for early adoption but have not been adopted.
None of these will have a material impact on the financial statements of
the Fund.
A) GENERAL INFORMATION
The Fonterra Shareholders’ Fund (FSF or the Fund) is a New Zealand
managed investment scheme established to be the ‘Authorised Fund’ under
Fonterra’s Trading Among Farmers scheme. It is registered under the
Financial Markets Conduct Act 2013 and its governing document is the
Fonterra Shareholders’ Fund Trust Deed (the Trust Deed) dated 23 October
2012 (as amended) and has a life of 80 years. Under the Trust Deed, the
Fund may invest only in authorised investments, which are Economic
Rights of Fonterra shares (Economic Rights), and issue units to investors. It
may not invest directly in Fonterra shares (shares).
The Fund is listed on the NZX Main Board operated by NZX Limited and as
a Foreign Exempt Listing on the Australian Securities Exchange operated by
ASX Limited. The activities of the Fund and the issue of units to the public
are managed by FSF Management Company Limited (the Manager). The
immediate and ultimate parent of the Fund is Fonterra Co-operative Group
Limited (Fonterra).
The New Zealand Guardian Trust Company Limited (the Trustee) acts as the
trustee for the Fund. The Economic Rights assets are held on trust for the
Trustee under the Fonterra Economic Rights Trust by Fonterra Farmer
Custodian Limited (the Custodian). The trustees of the Fonterra Farmer
Custodian Trust also hold one unit known as the Fonterra unit.
The Manager is an FMC reporting entity under the Financial Markets
Conduct Act 2013. The registered office of the Manager is 109 Fanshawe
Street, Auckland Central, Auckland 1010, New Zealand.
The financial statements were authorised for issue by the Manager on
17 September 2020.
Fonterra financial statements
Investors are encouraged to read the financial statements of Fonterra,
together with the financial statements of the Fund, given that the
performance of the Fund is driven by the performance of Fonterra. The
Fonterra financial statements can be found at www.fonterra.com in the
‘Investors/Financial Results’ section.
Activities
The principal activity of the Fund is to acquire Economic Rights and issue
units to investors. It allows investors in the Fund an opportunity to earn
returns based on the financial performance of Fonterra.
Economic Rights and units
One Economic Right represents the right to receive dividends and other
economic benefits derived from a fully paid share in Fonterra. This does not
include the right to hold legal title to the share or to exercise voting rights
in Fonterra.
A unit constitutes an undivided interest in the Fund. The Fund is designed
to have the effect that each unit on issue in the Fund will represent the
Economic Right derived from a single share in Fonterra.
Key attributes of Economic Rights
–The right to receive a distribution equivalent to any dividend declared by
the Fonterra Board (before PIE tax, withholding tax or other tax on
distribution).
–The right to participate in other transactions in respect of Fonterra
shares such as bonus issues, rights issues or buy backs.
–The right to share in any surplus on liquidation of Fonterra.
Significant Accounting Policies
FOR THE YEAR ENDED 31 JULY 2020
Key rights and restrictions of unit holders
–Unit holders will be entitled to have passed through to them an amount
equal to any dividend payable in relation to a share in Fonterra (less any
PIE tax, withholding tax or any other adjustments for tax in relation to
that unit holder).
–If Fonterra reconstructs or adjusts its shares, an equivalent
reconstruction or adjustment will be made in respect of units.
–If Fonterra makes bonus issues or rights issues of shares to its
shareholders, corresponding issues of units will be made to unit holders.
–If there is an offer to acquire shares held by the Custodian, the Fund will
seek instructions from unit holders as to whether the offer should be
accepted. If a unit holder directs the Fund to accept the offer, the Fund
will redeem units from such unit holder and accept the offer for shares in
proportion to that direction. The amount received from the sale of the
shares will be paid by the Fund to the unit holder.
–Unit holders are entitled to attend and vote at unit holder meetings and
to elect three Directors of the Manager of the Fund. The additional two
Directors of the Manager of the Fund are appointed by Fonterra.
–Unit holders do not have any right to attend or vote, or request the
Custodian to attend or vote, at any meeting of Fonterra farmer
shareholders.
Key rights of the Fonterra unit holder
The Trust Deed cannot be amended without the prior approval of the
holder of the Fonterra unit if that amendment would change the
governance structure of the Board of the Manager, the scope and role
of the Fund, the exchange mechanism for units and Economic Rights
and the individual fund size restrictions.
In other respects, the holder of the Fonterra unit has the same rights
as any other unit holder.
B) BASIS OF PREPARATION
These financial statements comply with New Zealand Equivalents to
International Financial Reporting Standards (NZ IFRS) and have been
prepared in accordance with Generally Accepted Accounting Practice
(GAAP) applicable to for-profit entities. These financial statements also
comply with International Financial Reporting Standards (IFRS).
These financial statements are prepared on a historical cost basis, except
for Economic Rights and amounts attributable to unit holders which have
been measured at fair value.
These financial statements are presented in New Zealand dollars ($), which
is the Fund’s functional and presentation currency, and rounded to the
nearest million, except where otherwise stated.
The same accounting policies are followed in these financial statements as
were applied in the financial statements for the year ended 31 July 2019.
The preparation of financial statements requires the Manager to make
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amounts of assets, liabilities, income
and expenses. Actual results may differ from these estimates. Estimates
and judgements are continually evaluated and are based on historical
experience and other factors, including expectations of future events that
are believed to be reasonable under the circumstances. Revisions of
accounting estimates are recognised in the period in which the estimates
are revised and in any future periods affected.
The judgement that has the most significant effect on the amounts
recognised in the financial statements relates to the valuation of the
Economic Rights of Fonterra Shares. The valuation approach used for the
Economic Rights is described in Note 1.
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Fonterra Shareholders’ FundAnnual Report 2020

2 ECONOMIC RIGHTS OF FONTERRA SHARES
The Economic Rights are held on trust for the Fund by the Custodian under the Fonterra Economic Rights Trust.
31 JULY 202031 JULY 2019
Value of Economic Rights ($ million)400388
Number of Economic Rights104,581,516102,934,582
The Economic Rights are measured at fair value, calculated as the number of Economic Rights held multiplied by the established fair value for each
Economic Right.
$ MILLION
31 JULY 202031 JULY 2019
Opening value of Economic Rights 388570
Movements:
Purchase of Economic Rights6582
Sale of Economic Rights(59)(120)
Revaluation of Economic Rights6(144)
Closing value of Economic Rights400388
3 AMOUNTS ATTRIBUTABLE TO UNIT HOLDERS
31 JULY 202031 JULY 2019
Value of amounts attributable to unit holders ($ million)¹400388
Opening number of units on issue²102,934,582111,423,603
Number of units issued17,298,92717, 769, 331
Number of units redeemed (15,651,993)(26,258,352)
Closing number of units on issue104,581,516102,934,582
1 The amounts attributable to unit holders is measured at fair value, calculated as the number of units on issue multiplied by the unit market price at 31
July 2020 of $3.82 (31 July 2019: $3.77).
2 Included in the total number of units is one Fonterra unit which was issued at inception of the Fund.
Notes to the Financial Statements
FOR THE YEAR ENDED 31 JULY 2020
1 FINANCIAL RISK MANAGEMENT
The Fund is primarily established to invest in Economic Rights and issue
units to investors. As such its only investment comprises of Economic
Rights. Through the holding of this investment and issuing units to unit
holders, the Fund has limited net exposure to market price risk and liquidity
risk. The Fund has no direct exposure to interest rate, foreign exchange or
credit risk. The risk management policies employed by the Fund are
discussed in the notes below.
Market price risk
Market price risk is the risk that the value of an instrument will fluctuate as
a result of changes in market prices, whether caused by factors specific to
an individual instrument, its issuer or factors affecting all instruments
traded in the market.
The Fund’s financial instruments primarily comprise of investments in the
Economic Rights and amounts attributable to unit holders which are both
carried at fair value with fair value changes recognised in profit or loss. Both
of these instruments are exposed to market price risk. Any change in the
market price of the units will result in an equal and opposite change in the
market price of the Economic Rights. Hence, no impact on profit or loss in
the Statement of Comprehensive Income is expected due to changes in
market prices.
Liquidity risk
Liquidity risk is the risk that the Fund will not be able to meet its financial
obligations as they fall due. The Fund is not exposed to cash redemptions
and only certain parties are permitted to redeem their units. Where
permitted parties redeem units, the Fund will transfer one Economic Right
for each unit redeemed to meet the redemption. Unit holders will not
otherwise have the ability to redeem their units or exchange them for
shares. Hence, the Fund does not have significant liquidity risk.
Financial instruments fair value
The Fund measures the Economic Rights and amounts attributable to unit
holders at fair value.
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants
at the measurement date.
The Fund uses the following fair value hierarchy that reflects the
significance of the inputs used in making the measurements:
–Level 1: Quoted price (unadjusted) in an active market for an identical
instrument.
–Level 2: Valuation techniques based on observable inputs, either
directly (i.e. as prices) or indirectly (i.e. derived from prices). This
category includes instruments valued using: quoted prices in active
markets for similar instruments; quoted prices for identical or similar
instruments in markets that are considered less than active; or other
valuation techniques for which all significant inputs are directly or
indirectly observable from market data.
–Level 3: Valuation techniques using significant unobservable inputs.
The Fund has no Level 3 instruments.
The Fund’s amounts attributable to unit holders is a Level 1 instrument as
the unit price is quoted on the NZX Main Board, which is considered to be
an active market. The Manager considers market prices to be the most
representative measure of fair value as they are used by market participants
as a practical expedient for fair value measurement.
Where there is a bid and ask price, the Fund uses the price within that
range that is most representative of fair value. Where the last traded price
is within that range, the Fund uses the last traded price as fair value. Where
the last traded price falls outside that range the Fund uses the mid-point
between the bid and ask prices.
The market is monitored on an on-going basis to confirm that it remains
active for the purposes of establishing fair value.
Economic Rights are Level 2 instruments as Economic Rights are not listed
and there is no active market for Economic Rights assets. Economic Rights
are valued using the quoted price of units (which are considered to be a
materially comparable instrument) in the Fund listed on the NZX Main
Board. The on-going validity of assumptions relating to the comparability
between a unit and an Economic Right is regularly reviewed.
There have been no transfers between the categories in the fair value
hierarchy during any of the periods presented.
Capital risk management
The Fund manages its amounts attributable to unit holders as capital,
notwithstanding that amounts attributable to unit holders is classified as
a financial liability. The amount of unit holders’ funds can change on a daily
basis as the Fund is subject to the issue and redemption of units at the
discretion of Fonterra, the Registered Volume Provider, and Fonterra farmer
shareholders. Fonterra has an interest in ensuring the stability of the Fund
and has established a Fund Size Risk Management Policy which requires
that the number of units on issue remain within specified limits and that,
within these limits, the number of units is managed appropriately. Fonterra
can use a range of measures to ensure the Fund size remains within
the specified limits, including: introducing or cancelling a distribution
reinvestment plan, operating a unit repurchase programme and
introducing new units.
As at 31 July 2020, the Actual Fund Size relative to total Fonterra shares on
issue is below the target range specified in the Fund Size Risk Management
Policy. Fonterra has taken no specific actions to address this as it expects
the Fund size to increase over time as Fonterra’s performance improves.
1110
Fonterra Shareholders’ FundAnnual Report 2020

Fonterra (Delegated Compliance Trading Services) Limited
(DCT)
DCT is a wholly owned subsidiary of Fonterra which undertakes delegated
compliance trading in the Fund on behalf of Fonterra’s farmer shareholders.
Fund expenses
Fonterra, the Manager, the Trustee and the Custodian have entered into
the Authorised Fund Contract, which authorises the Fund to operate as
an Authorised Fund and regulates the relationship between Fonterra and
the Fund.
Under the Authorised Fund Contract all expenses relating to the Fund are
incurred and paid by either Fonterra or the Manager. The costs of running
the Fund include services by Fonterra for which there is no payment made,
as well as services for which the Fund contracts to third parties.
Included within the total expenses incurred and paid by Fonterra during
the year ended 31 July 2020 with respect to the Fund are the following
amounts paid to KPMG, appointed as auditor of the Fund for the year
ended 31 July 2020:
–Fees for the annual audit of the financial statements of $34,000,
–Fees for the review of the interim financial statements of $10,000, and
–Fees for other audit related services comprising agreed upon procedures
for Annual Meeting voting of $3,500.
Included within the total expenses incurred and paid by Fonterra during the
year ended 31 July 2019 with respect to the Fund are the following
amounts paid to PricewaterhouseCoopers, the auditor of the Fund for the
year ended 31 July 2019:
–Fees for the annual audit of the financial statements of $33,780,
–Fees for the review of the interim financial statements of $10,000, and
–Fees for other audit related services comprising agreed upon procedures
for Annual Meeting voting of $4,000.
Fund unit and Fonterra share transactions
As at 31 July 2020, the Custodian holds 104,581,516 (31 July 2019:
102,934,582) Fonterra shares on trust for the Fund.
Delegated Compliance Trading Scheme
On 12 February 2020, DCT made a net sale of 71,175 units for $0.3 million
on behalf of Fonterra Farmer shareholders participating in the 2020 season
Delegated Compliance Trading Scheme. In the prior year on 10 October
2018, DCT made a net purchase of 45,164 units for $0.2 million on behalf
of Fonterra farmer shareholders participating in the 2019 season
Delegated Compliance Trading Scheme. The sale or purchase of units
with the Fonterra farmer shareholders are transacted on the same day.
Therefore, no units are held by DCT on behalf of Fonterra’s farmer
shareholders at the close of trading.
4 RECONCILIATION OF NET CASH FLOW FROM OPERATING ACTIVITIES TO PROFIT
$ MILLION
31 JULY 202031 JULY 2019
Reconciliation of profit for the year to net cash flows from operating activities
Profit for the year––
Adjustments for:
– Fair value (gain)/loss on revaluation of Economic Rights of Fonterra shares(6)144
– Net change in fair value of amounts attributable to unit holders6(144)
Changes in assets:
Net (purchase)/sale of Economic Rights of Fonterra shares(6)38
Net cash flows from operating activities(6)38
5 NET ASSETS PER SECURITY
As at 31 July 2020, the net assets per unit on issue was $3.82 (31 July 2019: $3.77).
6 COMMITMENTS AND CONTINGENT LIABILITIES
The Fund has no material commitments or contingent liabilities as at 31 July 2020 (31 July 2019: nil).
The Manager and the Trustee have agreed that Fonterra will meet the
day-to-day operating costs of the Fund. In addition, the Fund will use
corporate facilities, support functions and services provided by Fonterra.
All of these services will be provided at no cost to the Fund.
There are some costs that will not be covered by Fonterra. These principally
relate to circumstances where the Manager has breached certain
obligations or seeks to bring claims outside the ambit of those which
Fonterra has undertaken to pay. In these circumstances, the Manager
would have to seek funding from other sources. This could include seeking
a resolution of unit holders that they agree to bear the relevant costs
through a deduction from distributions that would otherwise be made by
the Fund.
Under Fonterra’s Contract Fee for Units Scheme, Fonterra provides
services and financial assistance to The New Zealand Guardian Trust
Company Limited, as trustee of The Contract Fee Trust, to acquire, on
market, and hold units on behalf of Fonterra’s contract milk suppliers
participating in the Scheme.
Fonterra Farmer Custodian Limited
The Fund has appointed Fonterra Farmer Custodian Limited, a subsidiary of
Fonterra, to provide custodian services. The Economic Rights are held on
trust for the Trustee by the Custodian under the Fonterra Economic Rights
Trust. Custodian services are provided at no cost to the Fund.
Notes to the Financial Statements CONTINUED
FOR THE YEAR ENDED 31 JULY 2020
Contract Fee for Units Scheme
During the year ended 31 July 2020 a net purchase of 685,781 units for
$2.7 million was made on behalf of Fonterra’s contract milk suppliers
participating in Fonterra’s Contract Fee for Units Scheme (31 July 2019:
a net purchase of 667,123 units for $3.3 million). During the year ended
31 July 2020 351,975 units were distributed to contract suppliers
(31 July 2019: 153,619 units were distributed).
As at 31 July 2020, 847,310 units were held on trust for the participating
contract suppliers (31 July 2019: 513,504 units).
Dividends received from Fonterra
No dividends were received during the year ended 31 July 2020 (31 July
2019: nil).
8 SUBSEQUENT EVENTS
Declaration of distribution
On 17 September 2020, the Board of Directors of Fonterra declared a
dividend of 5 cents per share. Following Fonterra’s dividend declaration, the
Board of the Manager declared a distribution of 5 cents per unit for the
year ended 31 July 2020. The distribution will be paid on 15 October 2020
to the unit holders on the register at 25 September 2020.
The Manager has a Distribution Reinvestment Plan, where eligible unit
holders can choose to reinvest all or part of their future distribution in
additional units. The Distribution Reinvestment Plan will apply to this
distribution. Participation in the Distribution Reinvestment Plan requires
unit holders to submit an election notice for participation by 28 September
2020. Full details of the Distribution Reinvestment Plan are available in the
‘Investors/Dividends’ section of Fonterra’s website.
Changes in unit price
Units are traded on the NZX and ASX and accordingly the unit price
changes regularly, including during the period between balance date and
the date these financial statements were authorised for issue. Changes in
the market price of the units result in a corresponding change in the value
of the Economic Rights asset held by the Fund. Daily unit prices are
available on the NZX website.
7 RELATED PARTIES
FSF Management Company Limited
FSF Management Company Limited is the Fund’s Manager whose sole
objective is to manage the Fund and its property as a passive investment
vehicle under the Trust Deed. Under the Trust Deed, the Manager is not
entitled to any fees in respect of its services.
Key Management Personnel are those people with the responsibility and
authority for planning, directing and controlling the activities of an entity.
As the Fund does not have any employees or directors, Key Management
Personnel are considered to be the Directors of the Manager.
Unit transactions and balances with Key Management
Personnel
As at 31 July 2020 181,783 units with a value of $694,411 were held by
Key Management Personnel (31 July 2019: 183,722 units with a value of
$692,632). The change in number of units held by Key Management
Personnel is due to the conversion of units to shares and a distribution
of units under the Contract Fee Trust.
Fonterra Co-operative Group Limited
Under the Authorised Fund Contract, Fonterra provides administrative
services in relation to the Fund for the Manager and meets the operating
expenses of the Fund, including the fees of the Directors of the Manager.
1312
Fonterra Shareholders’ FundAnnual Report 2020

Other matter
The financial statements of Fonterra Shareholders’ Fund, for the year ended 31 July 2019, was audited by another auditor who expressed an unmodified
opinion on those statements on 25 September 2019.
Use of this independent auditor’s report
This independent auditor’s report is made solely to the unit holders as a body. Our audit work has been undertaken so that we might state to the unit
holders those matters we are required to state to them in the independent auditor’s report and for no other purpose. To the fullest extent permitted
by law, we do not accept or assume responsibility to anyone other than the unit holders as a body for our audit work, this independent auditor’s report,
or any of the opinions we have formed.
Responsibilities of the Manager for the financial statements
The Manager, on behalf of the fund, are responsible for:
–the preparation and fair presentation of the financial statements in accordance with generally accepted accounting practice in New Zealand
(being New Zealand Equivalents to International Financial Reporting Standards) and International Financial Reporting Standards;
–implementing necessary internal control to enable the preparation of a set of financial statements that is fairly presented and free from material
misstatement, whether due to fraud or error; and
–assessing the ability to continue as a going concern. This includes disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless they either intend to liquidate or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objective is:
–to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud
or error; and
–to issue an independent auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs NZ will always detect
a material misstatement when it exists.
Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of these financial statements is located at the External Reporting Board (XRB) website at:
http://www.xrb.govt.nz/standards-for-assurance-practitioners/auditors-responsibilities/audit-report-2/
This description forms part of our independent auditor’s report.
The engagement partner on the audit resulting in this independent auditor’s report is Graeme Edwards.
For and on behalf of
KPMG
Auckland
17 September 2020
Independent Auditor’s Report
To the unit holders of Fonterra Shareholders’ Fund
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS
Opinion
In our opinion, the accompanying financial statements of Fonterra Shareholders’ Fund (the ’fund’) on pages 6 to 13:
i. present fairly in all material respects the fund’s financial position as at 31 July 2020 and its financial performance and cash flows for the
year ended on that date; and
ii. comply with New Zealand Equivalents to International Financial Reporting Standards and International Financial Reporting Standards.
We have audited the accompanying financial statements which comprise:
–the statement of financial position as at 31 July 2020;
–the statements of comprehensive income, changes in net assets attributable to unit holders and cash flows for the year then ended; and
–notes, including a summary of significant accounting policies and other explanatory information.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (‘ISAs (NZ)’). We believe that the audit evidence we have
obtained is sufficient and appropriate to provide a basis for our opinion.
We are independent of the fund in accordance with Professional and Ethical Standard 1 International Code of Ethics for Assurance Practitioners
(Including International Independence Standards) (New Zealand) issued by the New Zealand Auditing and Assurance Standards Board and the
International Ethics Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International Independence
Standards) (‘IESBA Code’), and we have fulfilled our other ethical responsibilities in accordance with these requirements and the IESBA Code.
Our responsibilities under ISAs (NZ) are further described in the auditor’s responsibilities for the audit of the financial statements section of our report.
Other than in our capacity as auditor we have no relationship with, or interests in, the fund.
Materiality
The scope of our audit was influenced by our application of materiality. Materiality helped us to determine the nature, timing and extent of our audit
procedures and to evaluate the effect of misstatements, both individually and on the financial statements as a whole. The materiality for the financial
statements as a whole was set at $4 million determined with reference to a benchmark of fund total assets. We chose the benchmark because, in our view,
this is a key measure of the fund’s performance.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements in the current
period. The Fund only invests in Economic Rights of Fonterra Shares (Economic Rights). The value of the Economic Rights is based on the price of the
Units in the Fund which are quoted on the NZX Main Board. Given the nature of the Fund’s operations, we determined that there were no key audit
matters to communicate in our report.
Other information
The Manager, on behalf of the fund, are responsible for the other information included in the entity’s Annual Report. Other information includes
the Chairman’s report. Our opinion on the financial statements does not cover any other information and we do not express any form of assurance
conclusion thereon.
In connection with our audit of the financial statements our responsibility is to read the other information and, in doing so, consider whether the other
information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears materially misstated.
If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
1514
Fonterra Shareholders’ FundAnnual Report 2020

HOLDINGS OF DIRECTORS OF THE MANAGER
AS AT 31 JULY 2020
The following Directors of the Manager have disclosed relevant interests in units of the Fund:
DIRECTORNUMBER OF UNITS NATURE OF INTEREST
John Bruce Shewan (Chairman)15,680Trustee and discretionary beneficial interest held by Investment Custodial Services Limited
John Bruce Shewan (Chairman)4,512Power to control and exercise a right to vote and to control the acquisition and disposal
of these units held on behalf of his wife by Private Nominees Limited
Kimmitt Rowland Ellis15,000Trustee and discretionary beneficial interest held by Custodial Services Limited
Donna Maree Smit9,317Power to control and exercise a right to vote and to control the acquisition and disposal
of these units held by Corona Farms Limited
Donna Maree Smit1,124Power to control and exercise a right to vote and to control the acquisition and disposal
of these units held by Seven Mile Farms Limited
Andrew Webster Macfarlane122,150Power to control and exercise a right to vote and to control the acquisition and disposal
of these units held by Pencarrow Farm Limited
Andrew Webster Macfarlane10,000Trustee and non-beneficial interest held by Stonylea Trust
Andrew Webster Macfarlane4,000Trustee and beneficial interest held by GW and MA Macfarlane Family Trust
Statutory Information
FOR THE YEAR ENDED 31 JULY 2020
TWENTY LARGEST UNIT HOLDERS
AS AT 31 JULY 2020
UNIT HOLDER
NUMBER OF
UNITS
% OF TOTAL
ISSUED UNITS
Citibank Nominees (New Zealand) Limited3 , 0 6 7, 2 9 62.93
HSBC Nominees (New Zealand) Limited2,481,0772.37
Craigsmore Dairy II Services Limited2,100,0002.01
New Zealand Depository Nominee Limited1,576,5181.51
National Nominees Limited1,346,4221.29
JPMorgan Chase Bank NA NZ Branch-Segregated Clients Acct1,009,1210.96
FNZ Custodians Limited1 , 0 07, 16 80.96
The New Zealand Guardian Trust Company Limited8 47, 3100.81
JBWere (NZ) Nominees Limited845,4630.81
Custodial Services Limited <A/C 4>808,8320.77
Michael Douglas Hammond & Helen Mavis Hammond & Leigh Joseph Horton770,2700 .74
Ingleton Properties Limited675,3800.65
BNP Paribas Nominees (NZ) Limited – NZCSD <COGN40>653,1230.62
Tea Custodians Limited Client Property Trust Account592,5720.57
Peter Thomas Borrie & Adrienne Helen Borrie528,3040.51
HSBC Nominees (New Zealand) Limited A/C State Street526,7510.50
BNP Paribas Nominees Pty Ltd523,4530.50
Richard Wallace Shapero480,0000.46
Accident Compensation Corporation448,8920.43
HSBC Custody Nominees (Australia) Limited428,4700.41
Total20,716,42219.81
Total quoted units on issue104,581,515100.00
SPREAD OF UNIT HOLDERS
AS AT 31 JULY 2020
SIZE OF HOLDING
NUMBER OF
HOLDERS
NUMBER OF
UNITS
% OF TOTAL
ISSUED UNITS
1 – 1,0002,8381,448,0401.38
1,001 – 5,0002,8777, 24 4 , 85 86.93
5,001 – 10,0007675,915,0875.65
10,001 – 100,0001,07739,141,07037. 43
100,001 and over20250,832,46148.61
Total
1
7, 76 1104,581,516100.00
1 Total includes the Fonterra unit (which is not quoted).
SUBSTANTIAL PRODUCT HOLDERS
As at 31 July 2020 no unit holders had filed substantial product holder notices in accordance with the Financial Markets Conduct Act 2013.
As at 31 July 2020 the Fund had 104,581,515 quoted units, and one Fonterra unit, on issue.
1716
Fonterra Shareholders’ FundAnnual Report 2020

Principle 1: Code of Ethical Behaviour
Code of Conduct
The Manager has a well-established Code of Conduct that, together with
the Board Charter, sets ethical standards for each member of the Board of
the Manager. The Code of Conduct guides the Directors on:
–the practices necessary to maintain confidence in the Manager’s
integrity; and
–the responsibility and accountability of individuals for reporting and
investigating reports of unethical practices.
The Code of Conduct and Board Charter are available on www.fonterra.
com in the ‘Investors/Fonterra Shareholders’ Fund’ section under the
heading ‘Charters and policies’.
Securities Trading Policy and Standard
The Manager has adopted Fonterra’s Securities Trading Policy and
Securities Trading Standard that detail the rules for trading in units and
other securities of Fonterra. The Policy and Standard are available on
www.fonterra.com and apply to Directors of the Manager and Directors,
officers, employees and contractors of Fonterra in addition to legal
prohibitions on insider trading in New Zealand and Australia.
Directors Unit Holdings
The independent Directors of Fonterra that are also appointed to the Board
of the Manager are prohibited from acquiring any relevant interest in units.
The other Directors of the Manager may acquire units, and to the extent
any units are acquired, these acquisitions will be disclosed to the market as
required by law.
Principle 2: Board Composition and Performance
Board Charter
The Board has statutory responsibilities for the affairs and activities of the
Manager and the Fund.
The roles and responsibilities of the Board are set out in its Board Charter.
Its roles and responsibilities include:
–monitoring the performance of the Fund and the implementation of
its objectives;
–monitoring compliance with the regulatory requirements and ethical
standards; and
–monitoring compliance with, and ensuring that unitholders’ interests are
managed and protected in accordance with, the constituent documents
for Trading Among Farmers as they relate to the Fund.
Given the Fund’s limited operational activity, the Manager has limited
discretion in respect of the day-to-day management of the Fund. To the
extent that any material exercise of discretion or other decision-making
authority is required, that discretion or authority is exercised by the Board.
The Board seeks independent professional advice when it considers that
appropriate. Fonterra pays the costs of independent professional advice
in accordance with the Authorised Fund Contract.
The Board Charter is available on www.fonterra.com in the ‘Investors/
Fonterra Shareholders’ Fund’ section under the heading ‘Charters
and policies’.
Statutory Information CONTINUED
FOR THE YEAR ENDED 31 JULY 2020
NZX DIVERSITY REPORTING REQUIREMENTS
As at 31 July 2020, the gender composition of the Board of the Manager
comprised two female and three male Directors. As at 31 July 2019, the
gender composition of the Board of the Manager comprised two female
and three male Directors. The Manager does not employ any person.
NZX WAIVERS
A summary of waivers and approvals granted by NZX Regulation in relation
to the NZX Main Board Listing Rules (NZX Listing Rules), which have been
relied upon by the Fund in the year ended 31 July 2020, can be found at
www.fonterra.com in the ‘Investors/Fonterra Shareholders’ Fund’ section
under the heading ‘Exchange Waivers’.
CORPORATE GOVERNANCE
Background
The Fund is a registered managed investment scheme under the Financial
Markets Conduct Act 2013. The Fund is required to have a supervisor
(trustee) and a manager. The role of the trustee is to hold the economic
benefit of shares held by the Fonterra Farmer Custodian for the benefit
of the trustee of the Fund. The role of the Manager is to issue or offer
units in the Fund and to manage the property of the Fund.
The Manager does not have any employees. Under the Authorised Fund
Contract, Fonterra has agreed to provide the Fund with administrative
services and to meet the costs of the general business of the Fund,
including paying the fees and expenses of the Directors.
The Trust Deed defines a narrow function of the Fund which is, in
summary to:
–issue units when new Economic Rights of Fonterra shares are held for
the benefit of the Fund;
–redeem units when required by a farmer shareholder, Fonterra or
the registered volume provider and direct that the Fonterra Farmer
Custodian transfers Fonterra shares to the farmer shareholder,
Fonterra or the Fonterra Farmer Custodian on behalf of the
registered volume provider seeking that redemption; and
–not undertake other trading activities.
The Fund is to be ‘passive’, i.e., it does not actively solicit Economic Rights
or the redemption of units except for undertaking the initial supply offer.
Corporate Governance Principles
The Board’s corporate governance framework takes into consideration
contemporary standards in New Zealand and Australia, incorporating
principles and guidelines issued by the Financial Markets Authority,
the NZX Corporate Governance Code 2020 (NZX Code) and the
ASX Corporate Governance Council Principles and Recommendations
(ASX Principles).
The corporate governance framework adopted by the Board reflects its role
as a manager of a fund with limited operational activity, which in several
ways is different to the corporate governance structure appropriate for
a traditional listed company carrying on an operating business.
Given the special purpose nature of the Fund, as at 31 July 2020, the
Manager has determined that a number of the recommendations in the
NZX Code and the ASX Principles are not appropriate for the Fund or are
not relevant.
In accordance with the NZX Listing Rules, the Manager has disclosed in this
corporate governance statement a summary of the corporate governance
policies, practices and processes adopted or followed at the date of this
annual report or explained why the Manager has decided to not comply
with any recommendation of the NZX Code.
References to ‘Board’ and ‘Directors’ in this statement are to the Board and
Directors of the Manager.
INTERESTS REGISTER
The Manager is required to maintain an interests register in which the particulars of certain transactions and matters involving the Directors of the Manager
must be recorded. The interests register is available for inspection on request.
General disclosures of interest
During the financial year, Directors of the Manager disclosed interests (including changes to previously disclosed interests), or a cessation of interests
(indicated in italics), in the following entities pursuant to section 140 of the Companies Act 1993:
DIRECTORNATURE OF INTEREST
John Bruce Shewan (Chairman)Acting Chair, China Construction Bank (New Zealand) Limited (ceased December 2019)
(remains a Director)
Philippa Jane DunphyDirector, Dangerous Goods Compliance Limited
Chair and Director, First Gas Limited and its associated companies (ceased June 2020)
Kimmitt Rowland EllisChair, Green Cross Health Limited
Chair, Turner Family’s Sleepyhead Group (ceased March 2020)
Andrew Webster MacfarlaneTrustee, GW and MA Macfarlane Family Trust
Specific disclosures of interest
During the financial year, no Director of the Manager specifically disclosed any transaction in which that Director had entered into with the Manager.
NZX TRADING HALTS
No trading halts were placed by NZX Regulation in the financial year ended 31 July 2020.
NZX NON-STANDARD DESIGNATION
The Fonterra Shareholders’ Fund has been granted Listing with a
‘Non-Standard’ (“NS”) designation by NZX Regulation. This designation
was granted because of the unique governance arrangements and unit
holder restrictions.
ASX LISTING
The Fund has an ASX Foreign Exempt Listing with ASX Limited which
means the Fund is primarily regulated by the NZX Listing Rules and
is to be exempt from complying with most of the ASX Listing Rules.
1918
Fonterra Shareholders’ FundAnnual Report 2020

Board and Committee Attendance
The table below reports attendance of Directors at Board and Audit
Committee meetings during the 2020 reporting period. Board and
Committee meetings are held together.
Board/Committee Meetings 1 August 2019 – 31 July 2020
BOARDAUDIT COMMITTEE
MEETINGSATTENDEDMEETINGSATTENDED
John Shewan3333
Pip Dunphy3333
Kim Ellis3333
Donna Smit3333
Andy MacFarlane3333
Diversity Policy
Given the small size of the Board, and as Directors are either elected by
unit holders or appointed by Fonterra, the Manager has not followed
recommendation 2.5 of the NZX Code and has not implemented a gender
diversity policy for the Board. The table below shows the number of female
and male Directors on the Board for the past four years.
AS AT 31 JULY2017201820192020
No. of Board
(female:male)2:32:32:32:3
Director Training
Directors are expected to keep themselves abreast of changes and trends
in the economic, political, social and legal climate generally. Directors are
also expected to keep up to date with governance issues.
The Manager on an ad-hoc basis requests the Management of Fonterra
to provide Fonterra specific training to remain current on how best to
perform their duties as Directors of the Manager.
Performance Assessment
The Board assesses its performance against its role and the Board
Charter and the performance of the Audit Committee against the
Audit Committee Charter.
Division of Roles
In accordance with the Trust Deed the Chair of the Board must be one
of the three unit holder Elected Directors, who are required to be
independent Directors.
The Manager does not have a CEO, so recommendation 2.9 of the NZX
Code that the Chair and CEO must be different people is not applicable.
Principle 3: Board Committees
Audit Committee
The Board acts as the Audit Committee for the Fund. The Chair of the
Audit Committee is the Chair of the Board. Due to the limited nature of
the Fund’s operations, the Board does not consider it necessary to comply
with recommendation 3.1 of the NZX Code to have a separate Chair for the
Audit Committee.
The Board acting as Audit Committee is responsible for:
–providing oversight in relation to financial reporting and regulatory
compliance; and
–reviewing financial reporting processes, internal controls, the audit
process and the process for monitoring legal and regulatory compliance.
The Manager has implemented a formal Audit Committee Charter
which sets out the responsibilities of the Audit Committee in full and
establishes a framework for the Fund’s relationship with its external
auditor. The Audit Committee Charter is available at www.fonterra.com
in the ‘Investors/Fonterra Shareholders’ Fund’ section under the heading
‘Charters and policies’.
Under the Trust Deed that governs the Fund, Fonterra’s external auditor is
also appointed as auditor of the Fund unless Fonterra requires a different
auditor. The Board of the Fund oversees the work of the external auditor
and also acts as a forum for communication between the Board and the
auditor where appropriate. The Audit Committee asks that the external
auditor attend the annual unit holder meeting and be available to answer
questions from unit holders relevant to the audit.
As the Fund has no employees, the Manager does not consider it necessary
to comply with recommendation 3.2 of the NZX Code and specify that
employees may only attend meetings by invitation of the Audit Committee.
Remuneration Committee
Given the small size of the Board and the fact the Fund has no employees,
the Manager has not established a separate Remuneration Committee and
therefore has decided not to follow recommendation 3.3 of the NZX Code.
Under the Authorised Fund Contract, Fonterra is responsible for the
payment of all director fees payable to the Directors of the Manager.
The remuneration of the Directors of the Manager may be reviewed and
adjusted from time to time.
Nominations Committee
Given the small size of the Board, the Manager has not established a separate
Nominations Committee to recommend director appointments to the Board
and therefore has decided not to follow recommendation 3.4 of the NZX
Code. The Board is appointed in accordance with the Trust Deed and the
constitution of the Manager. The Board is responsible for establishing the
criteria for determining the suitability of potential Elected Directors and
recommending persons suitable for appointment to the Board.
Other Committees
Given the Fund’s limited operational functions, the Board does not consider
it necessary or appropriate to have any other Board Committees as standing
committees as required by recommendation 3.5 of the NZX Code.
Takeovers Policy
Given the Fund cannot have any controlling interest in Fonterra, the
Manager has not established protocols that set out the procedure to be
followed if there is a takeover offer for the Fund (as contemplated by
recommendation 3.6 of the NZX Code).
Statutory Information CONTINUED
FOR THE YEAR ENDED 31 JULY 2020
Board Appointments
The constitution of the Manager provides for five Directors and sets out
how they are appointed.
In accordance with the procedure set out in the Trust Deed, unit holders
are entitled to elect three Directors (Elected Directors) and may remove
and replace any Elected Director.
The three Elected Directors must be ‘Independent Directors’ for the
purposes of the NZX Listing Rules. At the date of this statement the three
Elected Directors are John Shewan, Pip Dunphy and Kim Ellis. One Elected
Director is required to retire at each annual meeting of the Fund. The Chair
of the Board must be one of the three Elected Directors. John Shewan is
the Chair.
The remaining two Directors are appointed, and can be replaced, by
Fonterra. There is no requirement as to who the Fonterra-appointed
Directors must be. While they need not be Directors of Fonterra, the
current people that Fonterra has appointed (Andrew Macfarlane and
Donna Smit) are both Directors of Fonterra.
Skills required of a Director on the Board of the Manager include
governance experience, preferably of a listed entity, financial and
capital markets knowledge, an understanding of co-operatives,
and risk management experience.
The Manager has written agreements with each of its Directors.
Disclosure
Information about each Director (including experience, length of service,
independence and ownership interests and attendance at Board meetings)
is disclosed below or in the ‘Our Board’ section of this Annual Report.
Board Tenure
The graphic below shows the tenure of the current Board members
including the average length of service on the Board.
Tenure
AVER AGE
5.2
YEARS
0-3 year: 2
6-9 year: 3
Principle 4: Reporting and Disclosure
Continuous Disclosure
The Board aims to ensure that unit holders are informed of all major
developments affecting the Fund. Information is communicated to unit
holders through NZX and ASX announcements, the Fund’s annual report
and half and full-year results announcements.
Fonterra and the Manager have entered into an arrangement to co-operate
with each other and take all steps reasonably required to ensure that
information to be disclosed by either of them under the listing rules of the
Fonterra Shareholders’ Market, the NZX Listing Rules or the ASX Listing
Rules (as the case may be) is disclosed simultaneously to the Fonterra
Shareholders’ Market, the NZX Main Board and ASX in relation to the
Fund. It is intended that where NZX, as market operator of the Fonterra
Shareholders’ Market, receives information provided by Fonterra for
release under the Fonterra Shareholders’ Market, NZX simultaneously
releases the information under the code relating to the Fund. This process
is intended to be automatic.
The Manager does not consider it necessary to comply with
recommendation 4.1 of the NZX Code and to have its own continuous
disclosure policy. Due to the relationship between units and Fonterra
shares, the majority of continuous disclosure announcements are made
by Fonterra in relation to matters affecting Fonterra and the value of
Fonterra shares (and by implication the value of units).
Website Disclosure
At present the Fund has the following documents available on www.
fonterra.com:
–Board Charter
–Audit Committee Charter
–Code of Conduct
–Fonterra Group Securities Trading Policy and Securities Trading Standard
–Trust Deed
–A summary of key entitlements for unit holders and the Maximum
Holding Restriction
–Fund Size Risk Management Policy
–Fund Prospectus and Investment Statement
–Summary of NZX Waivers
Non-Financial Reporting
The Manager does not consider it necessary to comply with
recommendation 4.3 of the NZX Code and provide non-financial
disclosures annually given the Fund’s limited operational functions.
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Fonterra Shareholders’ FundAnnual Report 2020

Principle 7: Auditors
External Audit
The Audit Committee Charter provides a framework for the Fund’s
relationship with its external auditor.
Under the Trust Deed that governs the Fund, Fonterra’s external auditor is
also appointed as auditor of the Fund unless Fonterra requires a different
auditor. The Board of the Fund oversees the work of the external auditor
and also acts as a forum for communication between the Board and the
auditor where appropriate.
The appointed external auditor has historically attended the annual unit
holder meeting, and the lead audit partner is available to answer relevant
questions from unit holders at that meeting.
Internal Audit
Due to the nature of the Manager’s role as a manager of a fund with limited
operational activity, recommendation 7.3 of the NZX Code has not been
followed and the Manager has no formal or informal internal audit
functions.
Principle 8: Unit Holder Rights and Relations
Investor Centre Website
Fonterra maintains a dedicated investor webpage at www.fonterra.com
under ‘Investors’. This website is an important part of the Manager’s
communication with unit holders. It contains financial information, current
and historical annual reports and presentations, dividend and distribution
information, frequently asked questions and other relevant information
pertaining to the Fund. The website is freely accessible to the public and is
updated regularly.
Electronic Communications
The Manager provides an Investor Relations email address which
provides unit holders a mechanism by which they can communicate
electronically with the Manager on any matters relating to their
investment. All unit holder-related enquiries are provided with a
response within a reasonable timeframe.
Investors who have provided the Manager with an email address will be
sent annual and interim reports electronically unless they expressly opt
to receive hard copy reports and will receive other communications
electronically where requested. Unit holders are strongly encouraged
to provide an email address.
Voting
Under the Trust Deed the Manager and Fonterra need to comply with the
provisions of all applicable Listing Rules before taking action affecting the
rights attached to any unit.
Maximum Holding Restriction
Under the Trust Deed, no Unit Holder and its associates (excluding
Fonterra) can hold, or have a “relevant interest” in, more than 15% of the
Units on issue or 15% of the voting rights in the Fund, whichever is lower.
The Trust Deed also contains enforcement provisions to ensure compliance
by Unit Holders with this restriction. If Fonterra determines that a Unit
Holder is in breach of this restriction, Fonterra may determine that the unit
holder is not entitled to vote some or all of the units it holds in breach of
the restriction and can require that the unit holder dispose of the units held
in breach of the restriction. If the Units are not disposed of, the Manager or
Fonterra can arrange for their disposal.
Capital Raising
As the Fund has not sought additional equity capital during the year, the
Board has not needed to follow recommendation 8.4 of the NZX Code
which recommends the new equity capital raising be undertaken on a
pro rata basis.
Unit Holder meetings
Mechanisms are in place to promote effective two-way communication
with unit holders and to encourage their participation at unit holder
meetings, including:
–the Manager will release to the NZX Main Board and ASX market
announcements platform respectively all information sent to unit
holders and will comply with the NZX Listing Rules and ASX Listing
Rules with respect to unit holder communications.
Notices of meetings are sent to unit holders at least 14 days before a
meeting and can be found at www.fonterra.com in the ‘Investors/Fonterra
Shareholders’ Fund’ section under the heading ‘Related documents’ at least
28 days beforehand.
A unit holder may raise matters for discussion or resolution at general
meetings, by giving written notice to the Manager. If the notice is received
more than 25 working days before the last day on which notice of the
meeting is due, the Manager is required to, at the expense of the Fund, give
notice of the unit holder proposal and the text of any proposed resolution
to all unit holders entitled to receive notice of the meeting. The unit holder
proposing the resolution has the right to prepare a statement in support of
the proposal to include with the notice of meeting (clause 14.1 of the
Schedule to the Trust Deed).
Statutory Information CONTINUED
FOR THE YEAR ENDED 31 JULY 2020
Principle 5: Remuneration
Under the Authorised Fund Contract, Fonterra is responsible for the
payment of all director fees payable to the Directors of the Manager.
Fonterra has currently approved the following amounts of remuneration
for the Directors. These amounts exclude GST, where applicable:
–$80,000 per year to the Chair of the Board; and
–$53,000 per year to each independent Director.
Currently, Fonterra appointed Directors are not paid any remuneration, in
addition to their remuneration as Directors of Fonterra, for their service on
the Board of the Manager.
Remuneration Policy
Given the small size of the Board, the fact the Fund has no employees or
CEO, and due to the arrangements around director remuneration with
Fonterra, the Manager has therefore decided not to comply with
recommendations 5.1, 5.2 and 5.3 of the NZX Code.
Principle 6: Risk Management
The Board is responsible for the risk management of the Fund, including:
–reviewing the principal risks contained in the risk profile of the Fund on
an annual basis;
–ensuring that a risk management framework is established which
includes policies and procedures to effectively identify, treat and
monitor principal business risks, including consideration of internal audit;
–at least annually assessing the effectiveness of the implementation of
the risk management system and reporting back to the Board; and
–monitoring compliance with the risk management framework.
Given the Fund’s limited operational functions, its general risk and health
and safety risk profiles are limited. The management of risks relating to
Fonterra’s operations and which may affect the value of Fonterra shares
and dividends (and therefore the value of units and distributions flowed
through to unit holders) is a matter for the Board and Management of
Fonterra and is beyond the control of the Manager Board. On this basis,
the Manager has decided not to follow recommendations 6.1 and 6.2 of
the NZX Code.
To the extent that there are risks that specifically impact the operation of
the Fund, the Board reviews the management of those risks at quarterly
intervals. Specific areas of risk reviewed are:
–Regulatory compliance
–Investor confidence
–Data security
–People (Fonterra employees responsible for day-to-day operations
of the Fund)
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Fonterra Shareholders’ FundAnnual Report 2020

Directory
REGISTERED OFFICE OF THE MANAGER
OF THE FUND – NEW ZEALAND
109 Fanshawe Street
Auckland Central, Auckland 1010
Telephone: +64 9 374 9000
REGISTERED OFFICE OF THE MANAGER
OF THE FUND – AUSTRALIA
C/o Fonterra Australia Pty. Ltd.
Level 2, 40 River Boulevard
Richmond, Victoria 3121
Telephone: +61 3 8541 1588
DIRECTORS OF THE MANAGER
OF THE FUND
Philippa Jane Dunphy
Kimmitt Rowland Ellis
Andrew Webster Macfarlane
John Bruce Shewan
Donna Maree Smit
COMPANY SECRETARY
Andrew Cordner
SUPERVISOR
The New Zealand Guardian Trust Company Limited
Level 14, 191 Queen Street
Auckland Central, Auckland 1010
New Zealand
AUDITOR OF THE FUND AND THE MANAGER
OF THE FUND
KPMG
18 Viaduct Harbour Ave
Auckland 1010
New Zealand
LEGAL ADVISERS TO THE MANAGER
OF THE FUND
Chapman Tripp
Level 34, PwC Tower
15 Customs Street West, Auckland 1010
New Zealand
SHARE REGISTRAR – NEW ZEALAND
Computershare Investor Services Limited
Level 2, 159 Hurstmere Road
Takapuna, Auckland 0622
Private Bag 92119, Auckland 1142
Telephone: +64 9 488 8777
SHARE REGISTRAR – AUSTRALIA
Computershare Investor Services Pty. Limited
Yarra Falls, 452 Johnston Street
Abbotsford, Victoria 3067
GPO Box 3329
Melbourne, Victoria 3001
Telephone: 1800 501 366 (within Australia)
Telephone: +61 3 9415 4083 (outside Australia)
This document is printed on an environmentally responsible paper produced using
elemental chlorine free (ECF)FSC® certified mixed source pulp, sourced from well
managed and legally harvested forests, and manufactured under the strict ISO14001
environmental management system.
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FONTERRA067
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Fonterra Shareholders’ FundAnnual Report 2020

fonterra.com

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Confidential to Fonterra Co-operative Group Page 1

Distribution Notice
Section 1: Issuer information
Name of issuer
Fonterra Shareholders’ Fund
Financial product name/description Fonterra Shareholders’ Fund Units
NZX ticker code FSF
ISIN (If unknown, check on NZX website) NZFSFE000155
Type of distribution
(Please mark with an X in the
relevant box/es)
Full Year X Quarterly
Half Year Special
DRP applies X
Record date 25/09/2020
Ex-Date (one business day before the
Record Date)
24/09/2020
Payment date (and allotment date for DRP) 15/10/2020
Total monies associated with the
distribution
1

$5,250,570
Source of distribution (for example, retained
earnings)
Retained earnings
Currency NZD
Section 2: Distribution amounts per financial product
Gross distribution
2
$5,250,570
Gross taxable amount
3
$5,250,570
Total cash distribution
4
$5,250,570
Excluded amount (applicable to listed PIEs) 5 cents per unit (further details in the note below)
Supplementary distribution amount $-
NOTE: FSF is a Foreign Investment Variable Rate PIE. The whole distribution is excluded income for NZ
resident investors. PIE tax (for resident investors) or NRWT (for non-residents) may be deducted at the rate
appropriate for the investor.

1
Continuous issuers should indicate that this is based on the number of units on issue at the date of the form
2
“Gross distribution” is the total cash distribution plus the amount of imputation credits, per financial product, before the deduction of Resident
Withholding Tax (RWT).
3
“Gross taxable amount” is the gross distribution minus any excluded income.
4
“Total cash distribution” is the cash distribution excluding imputation credits, per financial product, before the deduction of RW T. This should include
any excluded amounts, where applicable to listed PIEs.

Fonterra Co-operative Group
Confidential to Fonterra Co-operative Group Page 2

Section 3: Imputation credits and Resident Withholding Tax
5

Is the distribution imputed Fully imputed
Partial imputation
No imputation
If fully or partially imputed, please state
imputation rate as % applied
6

N/A
Imputation tax credits per financial product N/A
Resident Withholding Tax per financial
product
$nil
Section 4: Distribution re-investment plan (if applicable)
DRP % discount (if any) 2.5%
Start date and end date for determining
market price for DRP
24/09/2020 30/09/2020
Date strike price to be announced (if not
available at this time)
01/10/2020
Specify source of financial products to be
issued under DRP programme (new issue
or to be bought on market)
New issue
DRP strike price per financial product N/A – available on 01/10/2020
Last date to submit a participation notice for
this distribution in accordance with DRP
participation terms
28/09/2020
Section 5: Authority for this announcement
Name of person authorised to make this
announcement
Andrew Cordner
Contact person for this announcement Simon Till
Contact phone number +64 21 777 807
Contact email address Investor.relations@fonterra.com
Date of release through MAP 18/09/2020

Audited financial statements accompany this announcement.


5
The imputation credits plus the RWT amount is 33% of the gross taxable amount for the purposes of this form. If the distribution is fully imputed the
imputation credits will be 28% of the gross taxable amount with remaining 5% being RW T. This does not constitute advice as to whether or not RWT
needs to be withheld.

6
Calculated as (imputation credits/gross taxable amount) x 100. Fully imputed dividends will be 28% as a % rate applied.